LESSON 26 COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? VISUAL 26.1 ECONOMIC GROWTH IN THE UNITED STATES, 1870-1900 The U.S. economy expanded rapidly between 1870 and 1900. • At the end of the Civil War, Americans produced approximately $531 worth of goods and services (Gross National Product, or GNP) per person. • By 1900, this amount doubled. • Transportation advancements between 1870 and 1900 played an important role by advancing the size of the U.S. marketplace. ✔ Transportation costs fell. It became cheaper to move things and people from one place to another. ✔ Speed of delivery increased. Things and people moved more quickly from one place to another. 304 FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? LESSON 26 VISUAL 26.2 MAIN LINE RAILROAD TRACK UNITED STATES, 1870-1900 Year Miles of Track 1870 1875 1880 1885 1890 1895 1900 53,000 74,000 93,000 128,000 167,000 180,000 207,000 QUESTIONS FOR IN OPERATION IN THE Percentage Increase Over a Five-Year Period 40 26 38 30 8 15 DISCUSSION A. Did the railroad network expand or contract between 1870 and 1900? B. By what percentage did the miles of track servicing the U.S. economy increase between 1870 and 1900? Source: Adapted from U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (U.S. Government Printing Office: Washington, D.C., 1960), Part II, Series Q287, page 321. FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY 305 LESSON 26 COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? VISUAL 26.3 BENEFITS AND COSTS OF RAILROAD EXPANSION FOR DIFFERENT MARKET AGENTS: RAILROAD INDUSTRIALISTS, OTHER INDUSTRIALISTS, CONSUMERS, FARMERS AND GOVERNMENT BENEFITS AND COSTS OF RAILROAD EXPANSION 306 FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? LESSON 26 VISUAL 26.4 VALUE OF FARM GROSS OUTPUT AND PRODUCT (1910-14) DOLLARS, 1870 - 1900 Gross output total as measured in constant (1910-14) dollars Year (The numbers below represent millions of dollars.) 1870 2,694 1880 4,129 1890 4,990 1900 6,409 IN CONSTANT Farm gross product, including improvements and manufactures (This statistic is a measure of agricultural output. The numbers below represent millions of dollars.) 2,597 3,906 4,638 5,837 Source: Adapted from U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (U.S. Government Printing Office: Washington, D.C., 1975), Part I, Series K240-250, page 482. FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY 307 LESSON 26 COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? VISUAL 26.5 PRE-CIVIL WAR TRANSPORTATION In the period before the Civil War, waterways and turnpikes provided efficient transportation for people, goods and services. • Shipping cost by water — through canals — was often lower than the cost of shipping by railroads. • Most railroad lines ran north and south, and many were located in close proximity to rivers and canals. • At this time, railroad lines were small. They were privately owned and they used non-standardized technology. • Customers faced relatively high transportation costs when using railroads. It is plausible that extending the system of public roads — turnpikes — and canals could have helped the United States economy to expand after the Civil War even if the railroad network not been developed. 308 FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? LESSON 26 VISUAL 26.6 THE OPPORTUNITY COST OF RAILROADS One way to measure the opportunity cost of developing the railroads is to compare the impact of railroads, as they existed, to the second-best alternative. The second-best alternative to railroads at the time was the expansion of waterways and roads that existed before the Civil War. HOW TO MEASURE THE IMPACT OF RAILROADS The net contribution of railroads to the U.S. economy during industrialization can be determined by two steps: • Estimate the value of total output (Gross National Product or GNP) produced in the presence of railroads • Subtract the estimated GNP produced in the hypothesized presence of the second-best alternative — waterways and turnpikes. FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY 309 LESSON 26 COULD THE U.S. ECONOMY HAVE GROWN WITHOUT THE RAILROADS? VISUAL 26.7 ESTIMATING THE CONTRIBUTION OF RAILROADS TO ECONOMIC GROWTH • Economic historians Albert Fishlow and Robert Fogel estimated that railroads boosted GNP in 1859 (Fishlow) and in 1890 (Fogel) by no more than 5 percent. • They concluded that industrialization would have proceeded in the absence of railroads. • According to this line of analysis, railroads were important, late in the nineteenth century, but they were not an indispensable form of transportation. 310 FOCUS: UNDERSTANDING ECONOMICS IN UNITED STATES HISTORY ©NATIONAL COUNCIL ON ECONOMIC EDUCATION, NEW YORK, NY